Cashflow management advice for local small business retailers

Having access to the cash you need when you need it’s critical in business. Survey after survey of small business retailers ranks cash flow as the biggest challenge they face.

Cash flow will be a challenge where the business has spent more than it can afford to, revenue is too low, or money is leaving the business in some way. A cash flow challenge could be a combination of any or all three.

The business owner is responsible for any cash flow challenge. They decide what is spent and when it’s spent. Ownership of the challenge is vital to resolving it.

Here are some obvious and often forgotten management principles designed to help improve the cashflow position of a business:

1. Borrow as little as possible. Capital that has an interest cost associated with it’s expensive to the business.
2. Turn stock as quickly as possible. The longer a product sits on your shelves, the higher the cost to the business.
   1. Make shopping easy.
   2. Display products to encourage purchase.
   3. Carry little or no back-room stock. Instead, rely on suppliers to supply just in time.
   4. Buy new stock based on what your data indicates works in the business.
   5. Stock more products like your top sellers and less products that are your bottom sellers.
3. Keep your labour cost as low as is practical.
4. Carefully consider what you expect to make from every business expense before making the expense.
5. Check to see if there are lower cost alternatives before paying overheads such as business insurance or utilities.
6. Set your prices to maximise the opportunity, balancing maximising margin with expected shelf time.
7. Where you can, pay suppliers to access a settlement discount and bank the additional margin on those products.
8. Sell online so the business is trading 24 hours a day and not restricted by the physical shop’s opening hours.
9. Don’t provide customer credit unless it’s essential.
10. Pay bills early if you have the cash.
11. Don’t spend money on anything in or for the business that you cannot measure. Measurement is critical to understanding if the spend has delivered financial value for the business.
12. Have appropriate shopper and employee theft mitigation steps in place.
13. Set aside an amount each week via an automated transfer into a rainy day account. This is to build a buffer should something unexpected happen within the business.

You’re very much in control of whether cash flow will be a problem in your business. Acting ahead of a problem is more important than being in a position where you need to react.

Data is key to cash flow comfort, data about business performance transactionally through to data as represented in the financial statements for the business. The more in control you’re of your business data and the better you understand it, the less likely you’re to encounter a cash flow problem.

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